Coverage: EU orders Amazon to pay nearly $300 million in back taxes

Amazon was told on Wednesday to pay about 250 million euros ($295 million) in back taxes to Luxembourg, the latest U.S. tech company to be caught up in a European Union crackdown on unfair tax deals.

Robert-Jan Bartunek of Reuters had the news:

The fine was much lower than some sources close to the case had expected and is only a fraction of the 13 billion euros that Apple Inc was ordered to pay to Ireland last year.

EU Competition Commissioner Margrethe Vestager, who has other big U.S. tech companies in her sights, has taken a tough line on multinational companies’ approach to tax.

“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” Vestager said.

Amazon said it was considering an appeal.

“We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law,” Amazon said in a statement after the announcement.

Gaspard Sebag and Stephanie Bodoni of Bloomberg News reported that the EU sent a message to companies with shell firms:

The EU took a dim view of a structure that allowed Amazon to slash its taxable profits in Europe over about a decade by channeling them to a tax-free unit located in Luxembourg that was meant to license the technology behind its web shopping platform.

Officials found one big problem with the arrangement: the unit was just a shell company, how could it therefore perform complex duties such as licensing and managing intellectual property? Impossible, according to the EU. Both Amazon, which is a major employer in Luxembourg, and the country’s government deny they broke any rules.

As EU Competition Commissioner Margrethe Vestager put it on Wednesday, “an empty shell” with “no employees, no offices and no business activities” can’t possibly perform activities that would allow it to lay claim to billions of euros of royalty revenue. Yet according to the EU, that’s just what Luxembourg allowed the company to do, in breach of its own tax rules.

Jason Del Ray and Tony Romm of Recode called the payment a slap on the wrist for Amazon:

For Amazon, the size of the tax payment still would amount to essentially a slap on the wrist. The company generated a nearly $2.4 billion profit on $136 billion in revenue in 2016 alone.

For Vestager, the ruling is only her latest swipe at the U.S. tech industry. In recent years, she’s led the region’s numerous antitrust investigations of Google, most recently slapping the company in June with a record 2.4 billion Euro fine for the way it handles shopping search results.

Vestager has also focused on tax breaks that European Union countries have handed out to large, multinational corporations. In 2016, she penalized Apple 13 billion Euros on grounds that it benefitted from preferential tax treatment from Ireland. On Wednesday, Vestager said she was taking Ireland to court for failing to make progress on recouping the money.

In the case of Amazon, the commission argues that a 2003 tax ruling by Luxembourg — that was extended in 2011 — allowed Amazon to pay out royalties from one of its entities to another to take down its tax bill.